Retailers look to improved Christmas spend

RETAILERS are forecasting an improvement in spending in the weeks before Christmas, which will at least make up for another tough year.

But business confidence has lost some of its post-election gusto, undermined by continuing weak trading conditions.

A new survey on Tuesday found retailers expecting shoppers to spend about $42.1 billion during the peak Christmas shopping period starting from November 14.

By Roy Morgan Research for the Australian Retailers Association, the survey said this would be 3.3 per cent higher than during the 2012 Christmas period.

The association's executive director, Russell Zimmerman, said this growth may reflect shoppers starting the festive season early.

"The ARA is pushing for an interest rate cut in December as retailers are counting on the lead up to Christmas as an opportunity to catch up on past slower retail sales and get back on track financially," Mr Zimmerman said in a statement.

Financial markets suggest retailers will be disappointed.

Only a minimal chance of a cut in the 2.5 per cent cash rate is seen at this stage.

National Australia Bank's monthly business survey showed confidence in October wound back from a three and a half year high, albeit still in line with its long term trend going back to 1989.

Confidence jumped in the immediate aftermath of the September 7 election, which brought a majority coalition government to power after three years of fragile Labor minority rule.

Macquarie Research economist Gabby Hajj said the Reserve Bank of Australia (RBA) had questioned whether this boost in confidence would be sustained, especially given the underperformance of actual trading conditions.

"It appears that businesses are becoming increasingly aware that a change in government does not necessarily eliminate structural problems," he said in a note to clients.

This includes the changed behaviour of households, the imperative to reduce costs and improve productivity and also the need to cope with a strong Australian dollar.

"This result should provide a timely reminder for the RBA that more will need to be done in order to restore and sustain healthy confidence among businesses," Mr Hajj said.

NAB's business confidence index retreated to five points in October from 12 points in the previous month. Its conditions index was unchanged at minus four.

NAB's group chief economist Alan Oster said forward indicators in the survey do not paint a favourable picture for the outlook, and while employment conditions lifted to a one-year high, its index at minus three implied further job shedding ahead.

The bank expects the unemployment rate to nudge six per cent by the end of 2013, and reach 6.5 per cent by the end of 2014.

This compares with a jobless rate of 5.7 per cent in October.

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